Consumers may be aware of blood diamonds but mining precious metals throws up a bevy of environmental issues. While many jewellery companies have struggled during the economic crisis, others have seen their balance sheets remain steady or even surge. And sales of precious metals, with gold in the lead, show no indication of easing. With the global economy even more volatile because of the US debt ceiling crisis, gold, a metal that requires massive amounts of water for its extraction, is a hot commodity. The environmental effects of mining will only worsen as more companies continue to extract gold to meet increased demand. Companies are only gradually addressing the impacts the industry has on land management, human rights and water – all of which are intertwined.

The jewellery industry has made attempts at self-correction and certification but to critics, efforts like those of the Responsible Jewellery Council are not enough to stop the land and water contamination resulting from precious metal extraction. According to Marc Choyt of the Fair Jewellery Action (FJN), companies gain plaudits for ethical sourcing even while their operations contaminate water supplies.

"The pollution of watersheds is one of the most onerous long-term effects as a result of the extraction of gold and precious metals, as is the case of AngloGold Ashanti's operations in Ghana," says Choyt. AngloGold Ashanti suspended operations at two of its operations in Ghana last year, in part because of water-related concerns. The company will build two water treatment plants, expects one to reopen next year, and is on target to produce at least 400,000 ounces of gold in 2012.

Choyt claims that large companies are doing little on the water stewardship front and in fact contribute to what he and other experts call the "resource curse," the case in which African countries rich in resources end up worse off because of indiscriminate resource extraction. Local people, meanwhile, are left with scarred land and little clean water for agricultural or residential use. Cyanide, mercury, and sulphuric acid are just a few chemicals used to leach precious minerals out of the earth, leaving large swaths of land and water severely contaminated.

FJN and Lifeworth Consulting, a UK consulting firm, have together published a report that evaluates 10 large European jewellery companies. Only two, Boucheron and Cartier, received decent scores, "active" and "significantly active" respectively, for their environmental stewardship efforts. Cartier's partnership with the mining company Goldlake Group, for example, provided a Honduras mine with a zero-discharge water management system that prevents the contamination of local water supplies. At its Neuchâtel, Switzerland manufacturing plant, Cartier claims that the modernisation of its water treatment system resulted in a 30% reduction in CO2 emissions.

Boucheron takes a more philanthropic approach with a partnership with Cirque de Soleil to raise funds to provide poor communities with drinking water.

Choyt insists that a lack of consumer awareness is part of the issue, but believes more companies should follow the lead of Tiffany & Co. While its sourcing is not perfect, Tiffany & Co has a reputable mine-to-market programme that provides consumers with the transparency and traceability through its Social Accountability Programme, which traces the company's products as they evolve throughout the supply chain. Tiffany is also a signatory to the Bristol Bay Protection Pledge, which states that the company will not use gold from Rio Tinto's proposed Pebble Mine project in Bristol Bay, Alaska – which Choyt and other critics claim would be a disaster for the local fishing industry and water supply.

So far, the demand for sustainably sourced jewellery is a small one. While many small jewellery companies work hard to ensure the sustainability of their materials, larger companies are far behind. Do not expect this to change unless consumers demand it – and recycling precious metals, albeit a positive step, is not enough to curb the growing demand for jewels and precious metals.